Mortgage rates reached a new low toward the end of April -- if you look at them the right way.

Since peaking in mid-March, 30-year mortgage rates have fallen for five out of six weeks to reach 3.40 percent by the end of April. That's pretty low by historical standards, but still higher than the all-time low of 3.31 percent that 30-year mortgages reached last November. But 15-year mortgages have also been dropping, and they managed to fall further than their previous low to reach 2.61 percent by the end of April.

Whether you are thinking of buying a house or refinancing an existing mortgage, that new low in 15-year rates makes it worth running the numbers through a mortgage calculator to see if a short-term loan might be best for you.

The buyer's perspective

For most home buyers, the objective is to figure out how much they can afford to spend on a house. That objective gives 30-year mortgages a compelling advantage -- while 15-year rates may be lower, spreading the payments of a loan over a time period that's twice as long results in significantly lower monthly payments.

However, if you are fortunate enough to readily afford the mortgage payments on a house that suits your needs, you might consider a shorter loan. When you run a 15-year and a 30-year loan through an amortization calculator and look at the total interest payable over the life of the loan in each case, you may find that the savings resulting from a shorter loan gives you plenty of incentive to accept higher monthly payments.

Doing the math

The same basic math applies to refinancing situations, but with an even stronger case for a shorter-term loan. Assuming that you've paid down some principal on your existing mortgage, it should be less of a leap to refinance with a 15-year loan.

This decision depends greatly on your reason for refinancing. If you are struggling to meet your monthly mortgage payments and are refinancing to make that burden more manageable, then a 30-year refinance at a lower rate would best meet your objective. However, if you are refinancing to capture a lower interest rate for the sake of long-term savings, refinancing to a 15-year mortgage would create the most savings over the life of the mortgage.

Richard Barrington has earned the CFA designation and is a 20-year veteran of the financial industry, including having previously served for over a dozen years as a member of the Executive Committee of Manning & Napier Advisors, Inc. Richard has written extensively on investment and personal finance topics.

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